SustainableSourcing

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We hold our suppliers to the same standards of integrity to which we hold ourselves. An unethical or illegal act by a supplier may hurt PepsiCo's reputation as a world-class company and cause a loss of goodwill in the communities we serve. Therefore, all suppliers are expected to follow our Supplier Code of Conduct, and relevant policies and commitments as a condition of doing business with us. These include:

These standards are based on international conventions including the Universal Declaration of Human Rights; the International Covenant on Civil and Political Rights; the International Covenant on Economic, Social and Cultural Rights; and the ILO Declaration on Fundamental Principles and Rights at Work.

Suppliers, vendors, contractors, consultants, agents and other providers of goods and services who do business with PepsiCo entities worldwide are expected to follow this Guideline, where the standards apply.

Our approach to enhancing supply chain compliance with our policies and commitments is based on:

Our Sustainable Sourcing Program – a formal risk assessment, third party audit and mitigation process for first tier suppliers who have gone through our Business Continuity Planning;

Our Sustainable Farming Initiative – a continuous improvement program based on environmental, social and economic indicators for farms that ultimately source products for PepsiCo within specific commodities (see also: Agriculture);

Awareness and training for all suppliers through ensuring our Global Supplier Code of Conduct is included in all new contracts and ongoing training for suppliers through webinars and in-person meetings;

Specific programs to improve knowledge, awareness and outcomes on new and priority supply chain issues. For example we are committed to third party audits focused on social and environmental aspects of land rights in Brazil, Thailand, Mexico and the Philippines (see also: Land Rights).

Supplier Code of Conduct

Our Supplier Code of Conduct (SCoC) sets out the expectations we have of our suppliers in the areas of business integrity, labor practices, health and safety, and environmental management. It is based on recognized international human rights standards and explicitly prohibits all forms of forced labor and child labor. Compliance with our SCoC is a condition of PepsiCo’s supplier contracts. The SCoC is available in 26 languages.

Supplier Code of Conduct Training

The below Supplier Code of Conduct online training helps our suppliers further understand the principles of our SCoC and supports our long-term sustainable sourcing supply goals by addressing known social risks and building capacity within our supplier operations. In 2017, 100% of our targeted key suppliers completed this Supplier Code of Conduct training as part of the Sustainable Sourcing Program.

We are in the process of updating The Supplier Code of Conduct Training to reflect the changes in PepsiCo’s Supplier Code of Conduct that were completed in June 2018. An English version of the training will be available in late July and versions of the training in Arabic, Brazilian Portuguese, Simplified Chinese, Russian, and Spanish will be available in August to support the revised SCoC training.

English version of Supplier Code of Conduct Training – available mid-July 2018

Suppliers are responsible for demonstrating their compliance with our expectations through activities within the SSP, including an Initial Risk Assessment, completion of SCoC training, a site-level Self-Assessment Questionnaire which is graded, and participation in on-site audits, as required. Suppliers are expected to take action to correct any non-compliances identified through the on-site audits, with a focus on continuous improvement throughout their operations.

In 2016, 794 on-site audits were conducted or recognized with first-tier suppliers using the SMETA 4-Pillar Audit Protocol or an equivalent assessment.

Following the on-site audits, sites were scored based on any non-compliances reported by the auditor, with sites scored from red to green based on the severity and number of instances of non-compliance found on-site. The most frequent findings in 2016 focused on health, safety, and hygiene, environmental and management systems, and working hours. Health, safety, and hygiene stood out as a key category, with the majority of noncompliance related to:

Fire safety

Health and safety management systems

Chemical safety

Building and site maintenance

Worker health/first aid

Where non-compliances are found during the on-site audit, a corrective action plan with a timeline for remediation is put in place by the supplier site and verification of closure is conducted through follow- up review by an approved third party auditing firm.

Since the SSP launched in 2015, we have seen strong improvement from sites as they learn from audit findings and demonstrate closure through a corrective action plan and subsequent follow-up audit. High-level results of this improvement are presented below, based on sites that have completed both initial and follow-up audits.